THE SAF BET THE BUSINESS JOURNALS - JULY 10, 2021 Sustainable aviation fuel — or SAF — might be the ticket to a greener future, but major investments in infrastructure are needed to make it a reality. Who will pay for it is the billion-dollar question. The Puget Sound region’s two largest passenger airlines and its largest cargo jet operator are embracing a new kind of fuel as politicians and environmentalists sharpen their focus on the role that jet emissions play in climate change. Alaska Airlines, Delta Air Lines and Amazon Air are moving to fill some airplanes with a new, potentially greener kind of gas, called sustainable aviation fuel (SAF). Boeing says all its planes will use the stuff exclusively by 2030. Right now, however, airlines and jet makers can’t buy enough SAF, which is made from various things like municipal waste, forest floor cuttings and other plants grown for that purpose, and later blended in with traditional jet fuel. The passage of a lower carbon-fuels standard bill in Washington state coupled with federal initiatives aim to bolster production and use of biofuels. Backers say this will generate hundreds of millions of dollars in new investments and what Sea-Tac Airport dubs “green-collar jobs.” But before this greener future becomes a reality, someone will have to pay for it. While the airlines and jet makers want to be greener and cut their emissions, they also want taxpayers in Washington state and across the U.S. to subsidize those efforts. A broad coalition of 24 U.S. aerospace and aviation industry groups joined forces recently to press Congress to financially support the development, production and distribution of SAF as part of the Biden administration’s trillion-dollar infrastructure package. In a letter to several lawmakers, including Washington state Sen. Maria Cantwell, the aerospace and aviation groups said they want taxpayers to help pay for SAF-specific tax credits to companies. They have also asked for a $400 million a year grant program for companies seeking to build or expand SAF facilities. But for now, airlines are taking small steps and they’ll need a lot of runway to ramp up their use of SAF in the Puget Sound region. ‘Culture of efficiency’ Alaska Airlines sustainability director Kirk Myers said the SeaTac-based carrier will focus on what he called “a culture of efficiency” to help grow the SAF sector in Washington state “as quickly as possible.” “We want to be the most efficient airline. It’s something we want to excel at,” Myers said, adding that a recent order for Boeing 737 Max jets will help cut Alaska’s carbon emissions. In April, Alaska unveiled a partnership with producer SkyNRG to source sustainable biofuels from municipal waste. At Delta Air Lines, Sustainable Aviation Fuels General Manager Keith Taylor said the Atlanta-based carrier intends to invest $1 billion over the next decade on sustainable fuels. Taylor said the airline’s decision this year to modernize its fleet with a big new Airbus A321neo order will help the airline improve its fuel burn 12%. Delta also wants to help build a refinery in Washington state that will produce fuels using forest biomass materials. It would supply fuels for Delta’s growing West Coast operations, Taylor said. Taylor noted that SAF production on the West Coast now is only about 5 million gallons in a year, an amount equal to a single day’s use of fuel and air travel by Delta’s fleet of aircraft. “SAF has a ways to go and we’re looking to put our stamp on it,” Taylor said. “Our efforts with partners will help increase the SAF supply.” With its own climate pledge front and center, Amazon Air also inked a deal in 2020 to acquire up to 6 million gallons of SAF supplied by Shell Aviation and produced by World Energy. The blended fuel includes feedstock of inedible agricultural waste fats and oils, which may reduce carbon emissions by up to 20% in its jet fuel. Amazon, which flies older, less fuel efficient cargo planes refurbished from retired passenger jets, signed a 12-month deal after trials on two flights from Washington, to Arizona and to Connecticut. The cargo airline said it’s “prioritizing sustainability” by adopting SAF into its operations, despite being only a few years old itself, and aims to become “a key enabler of SAF production, building demand.” Amazon said its investment in SAF will help reduce its operational carbon emissions while “building confidence” in the sustainable fuel industry. “Development of more efficient air cargo solutions is critical to achieving our goal of net-zero carbon across Amazon by 2040,” Amazon Global Air Vice President Sarah Rhoads said. In December, King County International Airport-Boeing Field took delivery of its first commercial load of SAF for use by aircraft at Leading Edge Jet Center (LEJC), a provider of business aviation services throughout the Pacific Northwest. That fuel comes from Avfuel, a leading aviation fuel provider. Fueling the movement Delta is working with Northwest Advanced Bio-Fuels, which carried out a $2 million feasibility study for a refinery Delta wants to help build in Washington. “It’s a culmination of a lot of effort by many people to create benefits for the state’s residents, employers, hundreds of workers at the project and SAF producers,” Northwest Advanced Bio-Fuels General Manager Dave Smoot said. Upon passing Washington’s clean fuels bill, Gov. Jay Inslee touted the state’s commitment to decreasing climate pollution by boosting electric vehicles and lower-carbon biofuels. Smoot said the bill’s measures remove most of the contingencies that he said would have “stifled” capital markets from investing in projects like the one his company is pursuing: a $1.7 billion refinery that would be built in Grays Harbor or perhaps another site. “The final bill creates an incentive for fuel producers to transition to cleaner fuels and focus on the impacts of climate change. Those who don’t will be left behind,” he said. Bainbridge island aerospace analyst Scott Hamilton, who publishes the specialty Leeham aviation newsletter, said he considers SAF a “real effort” and bid by the industry to cut its emissions, one which he considers more realistic than electric airplanes to cut emissions. “It’s really being driven by Europe. We are not the driving engine, but it is real,” Hamilton said. It could get very real for airlines soon. The European Union has drafted plans to set a minimum tax rate for polluting aviation fuels, Reuters reported July 4. The goal of the proposal is to cut EU greenhouse gas emissions by 55% by 2030, using 1990 levels as a baseline. The EU tax would not initially apply to sustainable fuels, including renewable hydrogen and biofuels. Is sustainable attainable? Stephanie Meyn, a sustainability official with the Port of Seattle, told port commissioners and other participants in a recent study session on SAF that the port is far from its 2017 goal of having 10% of all fuels used at Seattle-Tacoma International Airport be sustainable aviation fuels. Still, Meyn said the passage of the state Legislature’s bill would help the port advance its efforts and sustainability goals. The port-owned Sea-Tac Airport is making room in its longer-term master plan to include special areas for SAF fuel to be received and delivered to airlines at the nation’s eighth largest airport. However, cost-conscious airlines emerging from the destructive pandemic will buy their SAF fuels in states where tax incentives make them cheapest and where the price to fill up is the same as with conventional fuel, Meyn said. Right now, California makes those purchases inexpensive because of fuel subsidies, which is why California is the SAF capital of the United States, she said. Houston-based Phillips 66 and the Renewable Energy Group, based in Iowa, spiked plans in January 2020 to construct a large-scale renewable diesel plant in Ferndale. It would have been the largest refinery of its kind on the West Coast. “While we believe the Ferndale refinery is a strategic fit for this renewable diesel project, permitting uncertainties were leading to delays and higher costs,” Robert Herman, Phillips 66 executive vice president of refining, said at the time. Months later, Phillips 66 announced plans to transform its San Francisco refinery to produce renewable fuels. The company billed it as the world’s largest renewable fuels plant. Meyn said there was a gap of roughly $4 a gallon between what it costs to produce sustainable aviation biofuels and the current price for ordinary jet fuel in Washington, a gap that other states like California have narrowed. “Everything we can do to cut that price down is critical,” she said. Tom Michaels, United’s government affairs director in Washington, D.C., whose airline has invested in SAF production and signed a groundbreaking deal with major companies that have agreed to cover the difference in price of what it costs the airline to buy and produce SAF fuels for its jets, says other players based outside of California are needed. He has urged Washington state to fill the void. Washington state needs to become a SAF producer and supplier to provide alternative geographical sources for such fuels going forward, Michaels said. The price tag on SAF and other sustainable measures is sure to remain a sticking point with airlines, jet makers and politicians. “Boeing’s CEO is saying the plan is to have all Boeing airplanes fully-SAF capable by 2030. It’s absolutely achievable and feasible, as it has shown in demonstration flights,” said aerospace analyst Scott Hamilton. “Yet, you have to ask what the cost and environmental impact is of producing it? Nobody talks about that.”

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